British Business Bank increases SME credit supply by a further £51 million

What’s the major difficulty facing small business today? If you were to ask accountants they’d probably tell you the principle problem is getting access to credit. We may now have a more stable economy, and the banks may have managed to rebuild their assets, but never the less the major financial institutions still seem risk-averse and rather reluctant to lend to SMEs.

So where do SMEs turn when they want to get their hands on finance? Well, they look for alternatives: other players in the market who are willing to provide financial assistance to help start a business, grow an enterprise to the next level, or modernise to stay ahead of the competition. One of those alternatives is the British Business Bank (BBB): a government-owned, but independently-managed, business development bank dedicated to making finance markets work better for smaller businesses. The Bank was founded in 2013, and was tasked with increasing the supply of finance available to smaller businesses in areas where traditional markets weren’t working well. Its stated goal was to deliver greater volume and choice of finance.

By June 2015 the BBB had leant a total of £2.4 billion to smaller businesses and had helped over 40,000 SMEs get access to credit. Following on from this success, the government-owned British Business Bank has now agreed to provide an additional £51m facility to increase the supply of credit to small and medium-sized enterprises (SMEs) as part of the ENABLE Funding programme. This latest initiative aims to increase the supply of leasing and asset finance to Britain’s small business sector.

The British Business Bank has agreed to provide this £51m facility to LDF, a non-bank finance provider, to fund a portfolio of newly originated small business asset finance receivables. The transaction, which is 50 per cent guaranteed by the European Investment Fund, is the second of the British Business Bank’s ENABLE Funding programme, which aims to increase significantly the supply of leasing and asset finance to smaller businesses in the UK. It follows a £100m facility provided to Hitachi Capital (UK) Limited in October 2015.

“LDF are delighted to be working with the British Business Bank on this exciting initiative. Access to finance, particularly for asset procurement, remains a critical barrier to success for many smaller businesses and making this more readily available is something that we are fully behind.”

“We already deliver significant support to this sector, providing over £40m of finance in January alone. With strong ongoing support from our shareholder, Cabot Square Capital, and our recent acquisition of asset finance specialist, First Independent Finance (FIF), we have very ambitious plans for growing our presence in the SME market.”

“We believe that this facility will enable us to further grow that base and also provide a higher level of support, to a significant proportion of that client base,” he added.

The ENABLE funding programme will also be announcing additional agreements with other funders throughout the year. The refinancing will give institutional investors access to a large and highly diversified pool of SME debt.

Reinald de Monchy, managing director for wholesale solutions, British Business Bank, explained:

“This second transaction in the ENABLE Funding programme will further boost the availability of asset finance for businesses across the UK. We now have provided two facilities totalling £151 million and we anticipate further transactions throughout 2016. Our intention remains for these facilities to be refinanced through the capital markets once we achieve a required critical mass of circa £300 million or more.”

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